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By XE Market Analysis August 14, 2019 3:53 am
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    XE Market Analysis: Europe - Aug 14, 2019

    Consolidation has been ensuing so far today among the main currencies, which follows the bout of risk-off-reversal positioning during yesterday's London afternoon session after President Trump announced a delay in new tariffs on Chinese goods imports. USD-JPY settled in the mid 106.0s, below yesterday's peak at 106.97, which was the product of a vertiginous rally from pre-Trump tariff announcement levels around 105.30. AUD-JPY and other Yen crosses have seen similar price actions, with the Japanese currency having seen a sharp unwind in its safe haven premium. The Swiss Franc saw a similar move lower. EUR-USD has been comparatively stable, though made a moderate southward move, which has extended today to produce a two-day low at 1.1165, just 3 pips short of the nine-day low seen on Monday. The Brexit-afflicted Pound is trading off recent lows, but at prevailing levels it is still showing about a 0.5% decline from week-ago levels against both the Dollar and Euro. Sterling markets are now hunkering down into the September-3 reopening of parliament, which will herald an intense phase of Brexit drama when no-to-no-deal and pro-EU members will attempt to pass legislation that would block a no-deal exit from the EU on October 31. These members are also publicly musing on calling a no confidence vote on Boris Johnson's government (which, if successful, would give opportunity for a "unity government" to form or, if not, a general election), although it's not clear there would be enough support for it to succeed as a number of pro-Brexit Labour Party members would likely vote against. Boris may also chance calling an election if polls continue to look favourable for him.

    [EUR, USD]
    EUR-USD has made a moderate southward move, which has extended today to produce a two-day low at 1.1165, just 3 pips short of the nine-day low seen on Monday, though it remains to be seen whether this marks a break out of the pairings one-week-plus orbit of the 1.1200 level. The lack of directional impulse has come with both the Fed and ECB in easing mode, though President Trump's announced delay in tariffs has been a positive for the Dollar in the sense that it will reduce the onus on the Fed to provide stimulus to counter any detrimental impact of an intensifying trade war. We take a bearish view of EUR-USD. Support is at 1.1160-65.

    [USD, JPY]
    USD-JPY settled in the mid 106.0s, below yesterday's peak at 106.97, which was the product of a vertiginous rally from pre-Trump tariff-delay announcement levels around 105.30. AUD-JPY and other Yen crosses have seen similar price actions, with the Japanese currency having seen a sharp unwind in its safe haven premium. Assuming risk appetite holds up, USD-JPY will likely be biased higher.

    [GBP, USD]
    The Brexit-afflicted Pound is trading off recent lows, but at prevailing levels it is still showing about a 0.5% decline from week-ago levels against both the Dollar and Euro. Sterling markets are now hunkering down into the September-3 reopening of parliament, which will herald an intense phase of Brexit drama when no-to-no-deal and pro-EU members will attempt to pass legislation that would block a no-deal exit from the EU on October 31. These members are also publicly musing on calling a no confidence vote on Boris Johnson's government (which, if successful, would give opportunity for a "unity government" to form or, if not, a general election), although it's not clear there would be enough support for it to succeed as a number of pro-Brexit Labour Party members would likely vote against. Boris may also chance calling an election if polls continue to look favourable for him.

    [USD, CHF]
    EUR-CHF rallied at the prompt of news that President Trump is delaying new tariffs on Chinese goods, which drove an unwinding in the Swiss currency's safe haven premium. The cross printed a rebound high at 1.0922 after making a 25-month low at 1.0841. We retain a bearish view of the cross given ECB's course to additional monetary stimulus in September, and the risk of a disorderly no-deal Brexit on October 31.

    [USD, CAD]
    USD-CAD has settled back under 1.3250, down on the six-day high seen yesterday at 1.3293. The revival in risk appetite in global markets, which brought a near 5% rally in oil prices, has returned some demand to the Canadian currency. USD-CAD support comes in at 1.3207-10.

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